BBBEE: An Economic Controversy

Feature

The apartheid system discriminated against certain racial groups and consigned them to inferior jobs, limited possibilities and access to economic resources and education. While racial segregation was a reality in South Africa long before this, in 1948, the National Party came into power and as the ruling party; it set about formalizing segregation and racial hatred. Laws such as the Bantu Education Act of 1953, attempted to ensure that black people were never to be given the opportunity to rise above their circumstances through education. Black people (the term “black” refers to all previously oppressed non-white people) were left economically and educationally disenfranchised, so it only made sense that the first order of business for South Africa’s first democratically elected “black” government would be to begin righting these wrongs.

One of the main areas which government actively sought to begin to remedy apartheid ills was in the economic context. The introduction of BEE represented the opportunity for those who had been marginalized and left out of South Africa’s economy to be empowered, to participate and share in the abundance of the South African economy, or so they thought.

In an ideal world, BBBEE would bring an end to discriminatory practices in employment, promote equal opportunities in the workplace and ensure discrimination would not recur. It would give all black people, politically connected or not, greater opportunities to better their lot and be economically active citizens. But fast forward to 2012 and very little positive progress seems to have been made for the “ordinary” black South African.

Introduced with the intention of addressing the historical imbalances brought about by the apartheid system, which existed in South Africa from 1948 to early 1994, BEE (Black Economic Empowerment)

Resistance to BBBEE

One of the main reasons why BBBEE is not working is the resistance it faces from “previously advantaged” individuals and it’s easy to see why white people (previously advantaged) might be opposed to BBBEE. The very nature of BBBEE requires the preferential treatment of some groups while practicing “fair discrimination” against others. Case in point is the recent outcry against Woolworths South Africa’s hiring policy by the “Woolworth’s Whistleblower” who claimed Woolworths’ South Africa’s hiring policies were racist. Without fully understanding South Africa’s history and current efforts at redressing imbalances, one might think this blogger’s accusations were justified. However, as Woolworths in their response statement stated, “Like all South African companies, Woolworths has a role to play in transformation. For this reason, SOME positions (where there is under-representation) are designated for EE groups…” This position is not only compliant with legislation, but shows an organisation committed to BBBEE, a position a number of South African organisations have actively assumed, in order to “do their part”. Some previously advantaged people argue that it’s unfair for “born frees” to suffer for the sins of their fathers, but equally valid is the argument that generations of black people were raised under circumstances worse than any that the “new South Africa” imposes on “previously advantaged” people. The excessive focus on the black versus white aspect of BBBEE blurs the intention and purpose of BBBEE. It’s not a mechanism to favour black people, but all people groups who previously were denied access to resources, this includes women of all races and people with disabilities who would have found themselves unfairly discriminated against.

The Real Issue

Black South Africans major criticism of BBBEE is that it has empowered only a few, the likes of Cyril Ramaphosa and Tokyo Sexwale. Individuals who are well connected politically seem to feature prominently in a number of high profile BBBEE deals with large corporations from the inception of BEE. These individuals seemed to be making millions, while the majority of black South Africans still earned minimum wage and continued to live in squalor. The seeming favouritism of the system makes BBBEE seem like a system designed to favour a few and enrich them so they can pay off their political allies and still leave the poor out in the cold. BBBEE seems to have also failed to create viable black businesses, which are capable of delivering quality products and services at reasonable prices. Gwede Mantashe, in a recent speech accused black businesses “of using the state as their cash cow” and of building bridges “which erode at the first rainfall”. These accusations are based on recent incidents in which BBBEE companies have proved themselves to be less than capable of doing a good job and of being in business only to enrich themselves. The point of empowerment was not only to enrich a few, but to impart skills and give opportunity for skills development to those who historically were not offered these opportunities. Most BBBEE companies instead of learning the skills of the industry they are in, work only to get tenders and then outsource the work at a cheaper price to established companies where little or no skills transfer takes place.

Does BBBEE stand a chance?

Organisations like Umsinsi Health Care, a company specializing in wound and stoma-care product ranges, seem to have figured out how to make BBBEE work. Umsinsi have implemented what they term BBBEI, which refers to economic integration rather than “empowerment”. Umsinsi Health Care, under MD Amanda Wilde, chose to implement the John Lewis Partnership Model; a concept based on John Spedan Lewis’ idea that a business in which he and his family took home more money than all his employees combined was unsustainable and immoral. Recognising this, he chose to run the business as a partnership in which all 81 000 permanent staff are partners and together they own the John Lewis shops across the United Kingdom, Waitrose Supermarkets, online businesses and other enterprises. Umsinsi’s ownership model not only complies with South African legislation in a practical way, it also offers a sustainable model for empowerment in South Africa though it’s based on a United Kingdom concept. The company’s permanent staff members are all co-owners in the business and the profits remaining after all deductions are split between them. This sense of ownership gives motivation to the members of the company because they know that if they work hard, the profits will come in and they will enjoy their share of their efforts. Over and above this honest sharing and distribution of wealth in the organisation, Umsinsi is also committed to job creation, community upliftment and skills development.

The Royal Bafokeng Nation (RBN) is yet another example of how BBBEE can successfully benefit not only the minority, but an entire community. The land belonging to the RBN was found to be extremely mineral rich in the 1920s and instead of being short sighted and selling the land, the RBN gave rights to mining companies who pay royalties for the right to mine. These royalties have been ploughed back into the community and have been used to uplift the community by improving infrastructure and health service in the various wards, improving education, learning and beyond that, they have put in place a vision for the future. Through Vision 2020, the RBN are looking to diversify their investments so as to ensure that when their natural resources are depleted the people of the RBN are still able to sustain themselves. More than 300 000 people benefit from the RBN’s community based empowerment programme and many of them are from outside the Bafokeng community. Empowerment which is sustainable and sees beyond the present and the immediate benefits of a “deal done” is the kind of empowerment needed in South Africa.

Further proof that BBBEE and black businesses can be successful is the story of Sizwe Ntsaluba Gobodo. Sizwe Ntsaluba VSP and Gobodo Inc. were two small audit firms, which took advantage of the empowerment policies of government and grew steadily over the years to become medium size firms. In 2011 the two firms merged to form South Africa’s fifth largest audit firm, SNG, employing 800 people. Being South Africa’s fifth largest firm is not their only claim to fame, as SNG were recently appointed Transnet’s external audit. To be deemed fit to handle such a large and complex organisation’s audit in its entirety is an achievement any firm would be proud of in a country where black companies are synonymous with highly inflated prices and poor delivery of goods and services.

So while BBBEE appears to be failing, its failure is not in the ideology but in the implementation and execution. The inability of companies and government to implement the system appropriately is largely due to a corrupt system, which awards tenders to cronies and companies incapable of delivering service and empowering anyone. But for every company that lends to its failure there are those companies that we can learn from – companies that are looking to turn BBBEE into a practice that not only enriches previously disadvantaged individuals but also gives them the opportunity to learn, create, own, grow and build something which can be a legacy for generations to come, be they black or white.